Benchmark yields dropped 14 basis points in the previous
three sessions on optimism demand for existing securities will
increase once the government completes its annual debt-sales
program. The finance ministry will sell 100 billion rupees ($1.6
billion) of securities on Feb. 7 at the final auction of the
fiscal year ending March 31.

“There has been some profit-booking,” said Harish
Agarwal, a fixed-income trader in Mumbai at FirstRand Ltd. Bonds
should find support “going forward as there’s no supply after
this week’s debt auction,” he said.

The yield on the 8.83 percent bonds maturing in November
2023 rose three basis points, or 0.03 percentage point, to 8.71
percent in Mumbai, according to the central bank’s trading
system. At 8.68 percent, the rate was at its lowest level since
Jan. 23 yesterday.

Bonds gained earlier this week also on speculation an
auction of wireless spectrum to mobile-phone companies will
boost federal revenue, supporting Finance Minister Palaniappan
Chidambaram’s efforts to rein in the budget deficit.

India got bids worth 446.1 billion rupees on the first day
of the spectrum sale that started on Feb. 3, according to
official statements. The total value of the spectrum being
offered is at least 490 billion rupees, according to the
government notice inviting applications.

The April-December budget deficit was 95.2 percent of the
target for the year ending March 31, official data showed Jan.
31. The government aims to rein in the shortfall to within 5.42
trillion rupees, or 4.8 percent of gross domestic product, this
fiscal year, according to official estimates.

One-year interest-rate swaps, derivative contracts used to
guard against swings in funding costs, fell one basis point to
8.65 percent, data compiled by Bloomberg show.